Aurora Cannabis: good or bad are the results of Q4?

Aurora Cannabis (ACB) is a prominent player in the cannabis industry. After last month's Canopy Growth reported catastrophic results and pulled a slice from the cannabis sector, investors were waiting for the profits of Aurora Cannabis. The company reported its fourth-quarter results on Wednesday after the market closed. Did the company impress the investors?

Aurora Cannabis delivered as promised?

Aurora Cannabis generated a net income increase of 52% to $ 98.9 million on an annual basis (year on year) in the fourth quarter. The company missed its revenue guidance, which was $ 100 million – $ 107 million. The company also missed analysts' estimate of $ 108.2 million.

Aurora Cannabis failed to live up to its promise when it increased leadership. However, the results were not completely bad news.

In particular, the company's net cannabis revenue was in line with the guidelines. Revenue grew 61

% sequentially to $ 94.6 million. The company expects growth in all its business segments. Revenue from Canadian consumer cannabis increased 52% to $ 44.9. Medical cannabis revenue also increased 10% to $ 29.7 million. The company's wholesale revenue is about $ 20.1 million.

Aurora Cannabis expects an increase in cash costs for the production of gram and gross margin. The gross margin on net cannabis revenue has increased consistently from 3% to 58%. However, the cost of producing grams fell 20% in a row to $ 1.14 a gram.

What drives revenue and gross margin?

There was growth in all business segments in the fourth quarter's Aurora Canbis results. In particular, higher production capacity and supply from Aurora Sky and the Aurora River led to revenue. The reduction in cash costs per gram produced led to a gross margin. The higher gross margin of the bulk sales also led to the gross margin. Cannabis produced in the fourth quarter grew to 29,034 kilograms compared to 15,590 kilograms. Higher production capacity from Aurora Sky, Aurora River, and Ridge facilities contributed to increased production.

Is Aurora Cannabis Profit Growth? positive EBITDA. However, the company reported a negative EBITDA of $ 11.7 million. EBITDA is lower than analysts' estimate of $ 19.5 million, and EBITDA over the same period last year.

We know why positive EBITDA is important for a company. Most cannabis players report negative EBITDA in the last quarter, which means that their operating costs are higher. The Canadian Consumer Channel continues to be a challenge for Aurora Cannabis. The company works with its regulatory and channel partners to optimize distribution to improve profitability.

Tilray may report negative EBITDA of $ 17.5 million in the third quarter, which is lower than its EBITDA in the third quarter of 2018. The company may report a loss of $ 0.31 per share in the third quarter in compared to a loss of $ 0.20 per share in the third quarter of 2018.

Canopy Growth (CGC) (WEED) reported a negative EBITDA of $ 92.06 million in the first quarter of 2020. The company also reported large losses from $ 0.30 a share.

Aphria (APHA) reported a negative EBITDA of $ 0.2 million in the fourth quarter. However, the company reported $ 0.05 earnings per share in the fourth quarter.

Management Review

Speaking about results and prospects, Aurora Cannabis CFO Glenn Ibbot said: "We continue to see strong growth in cannabis revenue, both medically and and in consumer categories, our cultivation performance continues to reduce production costs and improve gross margins. Aurora's diversified product portfolio remains in line with demand from both patients and consumers. "

Aurora Cannabis share performance

Aurora Cannabis gained 18%, while Aphria and Canopy's growth increased by 10.2% and 16.2% in September. The company closed yesterday with 3.3%. However, Aurora Cannabis traded 8.1% earlier in pre-market trading.

Horizons Marijuana for Life ETF (HMMJ) earned 6.7% in September. HMMJ is tracking the North American cannabis industry. Tilray fell in August after its results. However, the company increased by 20% in September.

What is the next step?

All cannabis companies are preparing for cannabis 2.0, the second phase of cannabis legalization in Canada. Cannabis 2.0 will legalize food beverages embedded in cannabis, extracts and various other products. To learn more, read the legalization of Cannabis 2.0: Canada is ready.

The management of Aurora Cannabis stated: "With the launch of Canadian derivatives in the coming months, we have made the necessary investments to ensure readiness and focus on a variety of value-added products. We are very excited to deliver an expanded, high quality consumer market cannabis and new forms of products. ”

Along with the growth of Canopy, Tilray, Cronos Group and other Canadian cannabis companies, Aurora Cannabis plans to expand its grocery business after legalization. [19659004] Aurora Cannabis plans to create a strong product range that is ready to launch in December. The company does not expect increased revenue from the edible food business However, the company is optimistic that adjusted EBITDA may improve in the future due to higher revenue growth and improved gross margin. The company also plans to grow its cannabis business in the United States with the passage of the U.S. Agriculture Act .

The cannabis industry

We know how important regulations are for the production of cannabis. I think cannabis players could benefit from federal marijuana legalization. Violations of regulations have hit the industry heavily over the past few months. As a result, the presidential candidates are pushing for legalization. Aurora Cannabis mentioned that he is taking steps to ensure that its expansion into the US market complies with state and federal laws. To learn more, read Cannabis: While the US waits, the world opens.

So far, September has been good for cannabis companies. Markets and analysts were optimistic about Aurora Cannabis's results. Will the results of the company for the sector be reflected?

We will provide an in-depth review of the results of Aurora Canbis in the fourth quarter following our earnings call.